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Invest in Maldives

a guide for foreign investors

CTL Strategies recognised in 2021 Rankings of Chambers and Partners

CTL Strategies LLP has been ranked in the 2021 edition of Chambers and Partners.

Chambers and Partners, often regarded as the “gold standard” in the legal profession, is an independent research company operating across 200 jurisdictions. Chambers deliver rankings and insight into the world’s leading lawyers and law firms. The rankings are based on in-depth interviews with lawyers, in-house counsel of clients and independent experts.

The Guide remarks that the “firm has a significant focus on tax matters and earns considerable market respect in this regard. Its experience includes tax litigation and corporate services. It is heralded by sources as “up-and-coming”.

Recent Updates

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Regulation on the Classification of SMEs

The Regulation on the Classification of SMEs was gazetted on 9 January 2022 providing further details on the registration and classification of SMEs. The Regulation replicates the classification criteria of SMEs laid down under the First Amendment to the Small & Medium Enterprises Act. The businesses under the Small & Medium Enterprises Act (SME Act) are classified into micro, small and medium businesses.

Application Procedures

  1. The Regulation provides that the applications for SME classification can be submitted to the Ministry of Economic Development (the “Ministry”) using the Business Portal of the Ministry.
  2. For the purposes of SME classification, newly incorporated companies are required to submit to the Registrar of Companies, the forecasted revenue and number of employees for the first 12 months from incorporation date.
  3. Based on data from the Maldives Inland Revenue Authority, Maldives Pension Administration Office and the implementing agency of the Employment Act (Law Number 2/2008), the Ministry is required to conduct annual reviews before the end of August to revise the classification of businesses and record the changes in a manner accessible to the public.

Classification Criteria

The Regulation reiterates the classification criteria of SMEs provided under the SME Act. The classification is be based on the following information of the company:

  1. Number of employees;
  2. Total revenue; and
  3. Net profit.

Where a business does not fulfill all the criterias within a category, the classification is to be determined by allocating priority in the following manner:

  1. Number of employees – 40% (Forty Percent);
  2. Total revenue – 30% (Thirty Percent); and
  3. Net profit – 30% (Thirty Percent)

Similarly to the SME Act, the formulas to be utilised in determining the classification based on the above allocations have been provided Regulation.

Businesses Not Listed as SME

The Regulation further provides that where a business exceeds any maximum threshold prescribed in the criteria, such businesses will be recorded as not being classified as an SME.

Effective Date

The Regulation is in force from 9 January 2022.

Photo by Dan Burton on Unsplash

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Fourth Amendment to the Regulation on the Operation of Guesthouses

The Fourth Amendment to the Regulation on the Operation of Guesthouses was published on 30 December 2021, beginning a new chapter for Maldivian tourism sector. Under the Amendment, it is now permitted to establish homestay tourist guesthouses in residential units (including houses and apartments) where people reside.

Homestay Guesthouse Permits

Homestay guesthouses can be operated after obtaining a permit from the Ministry of Tourism. Permits are to be granted for locally owned businesses for a renewable period of 5 years. However, foreign brands can be established under franchise models by the local businesses.

Applicable Standards
The Amendment further sets out the standards, resources and amenities that must be available from the homestay guesthouses. This includes the following:

  1. Maximum of 5 rooms (with a minimum floor area of 120 sq ft) are allowed to be operated under such establishments.
  2. Arrangements have to be made for visitors to contact the responsible person from the guesthouse throughout the day.
  3. Third-party liability insurance has to be obtained covering perils to tourists.

Newly added Annexure 6 details the standards and services that must be met by the guesthouses and the allocated rooms in such places.

Permitted Islands
Section 32-12 of the Amendment provides that permits for homestay guesthouses will only be granted for islands or cities meeting the below requirements:

  1. An Island Manager appointed by the Council being assigned as the head of the Island Tourism Desk. The Island Tourism Desk is responsible for overseeing the tourism establishments at the island level. Annexure 7 of the Regulation includes the responsibilities of the Tourism Island Desk.
  2. Enactment of policies in accordance with guidelines of the Ministry of Tourism detailing how tourism activities can be organised in the island and the basic standards to be abided by tourists.
  3. Eateries being available during usual hours (including Ramadan) and laundry services being available in the island.
  4. Plan being formulated by the Council to manage emergencies in the island.

Operation of the Homestay Guesthouse
The homestay guesthouses are to be operated in accordance with the Maldives Tourism Act (Law Number 2/99) and other applicable laws. The Operator is responsible for the payment of taxes levied on tourists, to MIRA. Further, the Operator is required to maintain basic records of the tourists in accordance with the Regulation.

Effective Date

The Amendment is in force from 30 December 2021

Photo by Shaafi Ali on Unsplash

> More Updates

Guide

Year in Review 2021

Update

4th Amendment to the Regulation on the Operation of Guesthouses

Overview

Collection & Distribution of Service Charge